QDROphile

Getting another order from the court depends on state law and the status of the domestic relations proceeding. It is possible that if the matter is closed, the court will not reopen it for the convenience of the parties.

My post was entered without seeing the fmsinc post immediately preceding it. Upon cursory review, I think you have to fight the facts, if the facts are what people want or do not want. I have not enough experience with state domestic relations law to address the potential box of an unamendable property award and binding the terms of the domestic relations order strictly to the terms of the award. It seems wrong that an impossible outcome is locked in despite agreement by the parties to change it in order to achieve some resolution rather than suffer a completely ineffective judgment.

The QDRO fiduciary has determined that the order is not qualified, so a new order will have to be prepared. Everybody has to accept that if they want to execute a property division. It is the job of some lawyer who is competent to convince everybody else that the order has to reflect an amended award (however that may be accomplished under local law and procedure) that is capable of being qualified. In that quest, the lawyer is aided by IRC section 414(p)(3)(A). The lawyer may also make use of "actuarial equivalence" and that may be a difficult concept for the others to follow, but we have assumed a competent lawyer for the circumstances. Or maybe an actuary needs to be engaged to power the concept through despite the inability of others to comprehend/believe. I am in no way suggesting that fmsinc is incompetent; fmsinc is trying to rectify the accomplished exercise of incompetence. I think the answer is a separate interest QDRO and screw whatever crazy, vindictive, emotional stuff is going on with not wanting to have survivor benefits in the picture The pension is property. It has a value. That value is divided in the divorce is some way (maybe not 50/50). Once the value is divided, get over it. You don't get any last stab at the ex-spouse by dying. * Another tool is that if this solution is not accepted, other alternatives are going to be more expensive and uncertain. That tool only works with whoever is paying to effect the property settlement, but I bet both parties are paying in some way to some degree no matter what. If the participant does not like that, then start the pension payments and craft a shared payment QDRO that splits only the lifetime payments (form of benefit could ordered by the court, but it would have to be enforced by contempt because the plan administrator will not be bound to accept an election by other than the participant). An actuary might tell you otherwise, but there are some things you cannot do with a domestic relations order. See IRC section 414(p)(3). And the Rolling Stones would confirm that you can't always get what you want. I might recommend something else if someone know he or she is dying, but that comes with a lot of other complications.

Can you clarify what you mean by "workaround"? You imply that a rewrite of the order is not feasible, but that seems to be what is called for. Does anyone have any idea of what the parties, in their usual lack of understanding, expect? What is NRA and ERA for the plan? You used the term "shared interest" and I am familiar only with "shared payment" (which is what you seem to describe) and "separate interest" (which has a generally understood meaning even though there is no such thing as a true separate interest). Has the QDRO fiduciary determined the order is qualified? Is the QDRO fiduciary Fidelity? I assume you are aware that Fidelity has imperfect (to be generous) regard for compliance with QDRO law.

Conceptual addendum: A section 125 plan, especially the FSA part, is NOT like a 401(k) plan even though it is usually more or less conceived and treated like one by the providers. In a 401(k) plan, the assets are held in trust -- in the plan, of you will. The plan is its own entity. A section 125 plan is not a separate entity, self contained, with funds that belong to the plan for the benefit of participants. The spending accounts are obligations of the employer; there is typically no trust, although there may be some sort of holding account that is erroneously viewed as "plan assets." So a section 125 plan is not a thing in the same sense as a 401(k) plan -- the "accounts" that track the deferral and "spent" FSA amounts are assets and liabilities of the employer. That affects the transfer of the "plan" from A to B. For example, there has to be a transaction that addresses the assets and liabilities of A and B, not just an adoption by B of the plan (with its assets in trust), which is essentially all that happens for a 401(k) plan that does not change providers and fiduciaries. This means that details of the "plan" transfer are more intimately intertwined in the corporate transaction/reorganization. It is not simply a modular event that only requires an appropriate corporate.resolution and some cosmetic amendment of plan documents. But the helpful providers may suggest otherwise.

Since you are asking for us to indulge in speculation, let's imagine that the transition is accomplished by forming business B (empty, except for some capitalization) and then the assets, liabilities, employees, etc. of A are acquired by B either by asset purchase or merger. Assuming appropriate execution and documentation, the transplanting of of the section 125 plan can be accomplished essentially without missing a beat or any change that is apparent to employees. Appropriate disclosure will address the formalities such as name change, but there need be no direct economic effect. If business B is not essentially empty (such as having pre-acquisition employees and plans), the "appropriate execution and documentation" is more complex, but the same outcome in appearance to employees of A can probably be accomplished, at least for the remainder of the plan year, but that would be speculative.

Delay opens the door to unexpected and unintended negative (mostly for the alternate payee) consequences. The answer to your specific question: It depends. Worst case: Former spouse gets nothing.

The practical answer is that the one who wants the benefit needs to take the action. However, as part of the divorce proceeding it may be agreed or ordered that a particular person has the responsibility for carrying out the formalities of implementing the division of the retirement benefits. Common practice is that the alternate payee prosecutes the QDRO. See sentence #1.

Forget about the court order and enrollment timing for a moment. Is the employee eligible to enroll the children under the plan and has the employee requested enrollment? QMCSOs and other orders are usually a bypass of the deadbeat employee. If the employee is requesting the coverage, those direct legal compulsions may be superfluous. There may be a role for them as an exception to the plan’s rules relating to timing of enrollment.

Whose error activated the record keeper’s election function? When did the activation occur relative to instructions for elective deferrals? Describe how the instructions to the payroll system election function were presented to participants and eligible employees. For example, were the instructions to use the payroll election function in the SPD? Elsewhere? What else are employees instructed to do through the payroll system? What record keeper functions were officially usable by participants and how was the sanctioned use presented? Investment instructions? Who is the plan administrator and what role did/does the PA have in any of the policies and communications relating to participant elections of all sorts (e.g. beneficiary designations)?

What is the default to account for FICA taxes? The lawyers for the parties to the divorce are unlikely to know the rules and will be baffled by the taxation being heavier on the participant when they think they have ordered an “even” split. I have no love for the compensation packages of executives, but I think people should get the results that they expect. And plan administrators catch grief when the exec wakes up to the asymmetry too late to renegotiate. And, yes, I have seen this in real life.

I never bought into it, but no one appointed me to the bench. QDROs are an exception to the anti-assignment rules. If those rules do not apply, then you do not need a QDRO to divide the benefit, so the QDRO rules do not apply. That does not mean there are not issues with dividing the benefits, and some QDRO concepts are relevant, but that does not mean the QDRO rules should be applied directly. The inquiry is double digits old. I did not check the link. My interest is also double digits old. I may have missed the point.

See ESOP Guy. And the plan document should state the legal requirement.

A most requests for creative solutions amount to wanting to be told that the illegal proposition is acceptable.

To focus solely on your "equitable interest" question, there is nothing resembling a spousal equitable interest under a 401(k) plan, as you may understand "equitable interest" under state law, such as spouses have an equitable interest in a 401(k) plan in a divorce proceeding (meaning that 401(k) assets can be awarded to a spouse as part of the division of marital assets). Subject to some limited rights that may be, but are not required to be, provided pursuant to plan terms, as far as the 401(k) plan is concerned, the interest of a spouse under a 401(k) plan is limited to being the designated beneficiary in the event of death of the participant unless the spouse consents to having someone else named as designated beneficiary (and maybe a related right to consent to loans from the plan). The question becomes more complex under pension plans; that is another discussion. As for equitable interests of spouses under state law, the federal law, including law relating to QDROs, preempts state law, subject to QDRO law expressly generally respecting the substance division of the 401(k) assets with respect to spouses (and former spouses) under state domestic relations law.

This is serious, complex stuff, including the possible application of federal and state securities law. The employer needs to engage competent legal advisers.

The plan document matters. It is a contract. If the contract says that some amount will be put in some account by some date, then it is a breach of contract not to do so. This would most likely be an issue if the participant directs the investment of an account, as a practical matter, and not as a legal right in an unfunded (for tax purposes) plan. If the accrual is only a bookkeeping accrual, with a bookkeeping investment rate, then the plan usually will not speak about contributions. Instead, it will speak about accrual credits. The timing of a legal right to an accrued benefit (or an incremental accrual) is then a significant factor in timing of tax liability and and movement of actual funds is not relevant.

While (a) your question might be zeroing in on the answer: Whenever the plan documents say contributions must be delivered; (b) your question suggests a misunderstanding about unfunded and funded 457(b) plans for nonprofits and the tax consequences. Apologies if I have misapprehended.

Your questions all relate to state/local law and procedures and require evaluation by someone, probably a lawyer, knowledgeable about Delaware domestic relations law and court procedures. The federal law that is relevant to the retirement plan(s) requires that the order be an order under state domestic relations law. The federal law does not address matters such as signatures of the parties to the domestic relations proceeding. What is required for the order to be issued under state law depends entirely on state law.

Fairness is a relevant topic, especially in areas touched by tax policy, where subsidies create economic distortions. Distortions can be viewed as unfair to an individual or group or viewed as beneficial to the larger society, based on some notion of values of the political winners. The unfortunate history of subsidizing employer-provided health benefits is an issue that is a deeper level in the same mine shaft as this topic of employer subsidies of marriage and children. There are more overt examples of subsidy or penalty of marriage and children. The institutions and culture created by tax subsidy for employer-provided healthcare are now a big factors in the political arena in the debate about how best to make health care available and affordable. It is a shame that the elements are not recognized for what they are so they can be objectively evaluated in instead of manipulated by emotional appeals. The fight did not start with jpod's observations.

And, as my favorite priest once said, “People in Hell want ice water, too.”

Pay attention to applicable HSA contribution limits. No comment on the essential compliance question.

From a federal QDRO law perspective (also the retirement plan's perspective), it is possible depending on the nature of the plan, the attitude and sophistication of the plan administrator, and the actual terms of the divorce judgment. There is a lot to be done behind the claim to get it in proper position, probably including getting a domestic relations order that satisfies the QDRO requirements, which will be determined by state law. Generally no action will be taken by state courts with respect to a concluded divorce proceeding after the death of one of the parties, but never say never. The domestic relations order is merely in aid of carrying out the terms of the divorce judgment, which is one reason why those exact terms are critical. The plan administrator may have views about the original terms as well for purposes of accepting and effecting a domestic relations order. The divorce judgment is also a domestic relations order, but I use the term in this case to refer to another domestic relations order directed specifically at the retirement plan and benefits. I have also assumed that the divorce judgment would not satisfy the QDRO requirements.

Sorry to be unable to read between the lines, but did the plan treat the distribution of the $100K as a taxable distribution to the participant? I infer the negative. Voluntarily directing delivery of a distribution to a specified payee is not a problem, although it is a courtesy not required of the plan. Failure to account for a distribution properly on Form 1099-R is a problem. My first thought is to issue a corrected Form 1099-R. The participant will have to amend the 2018 tax return if it has been filed based on a Form 1099-R showing a distribution of $60K instead of $160K.

Benefits issue. Railroad retirement benefits are unusual, so general knowledge about ERISA QDROs might not serve well. Ask the question of the RRB to start. Divorce/State Law. You will not get any of former spouse’s RR benefits without a domestic relations order that modifies or supplements your divorce property awards. State law varies. Generally, revisiting divorce settlements/dispositions is proscribed or disfavored, especially after death. Exceptions apply. You will need competent advice about applicable state law concerning the circumstances.